Who pays IHT and when?

[Jason123456]

Scenario:
Husband...investments = £340k
Wife........Investments = £330k
House Value.............. = £375k.......Tenants in Common....... = £187k each.

Hence...Husband assets = £527k. Wife assets = £517k

April 2018.. Husband gifts £25k to each of Two children...total gifted £50k.......leaving assets of £477k

Wife. gifts £25k to each of Two children...total gifted £50k.......leaving assets of £467k

June 2018.Husband dies leaving his estate assets to Wife............Question: Is IHT due from Children,if so,do children pay,or does Husbands estate pay......before/after estate settled?

Dec 2018..Wife dies leaving whole estate assets to children/.........Question: Do children have to pay IHT before estate is settled,or can it be paid by estate when settled?

At what stage does IHT have to be paid?...........what amount of IHT needs to be paid at each death?....by whom?

[Jason123456]

Further question:

Am I correct in thinking that upon death within 7years,the children would be required to pay IHT on the Gift,....however I believe they could refuse to pay and in that case the IHT payment would be paid by the estate?.....but if they did refuse to pay could probate still be obtained to sort out the rest of the estate......but again if the estate does pay the associated IHT then I presume probate has been obtained?

[AGoodman]

1.Father's death - no IHT. The gifts are within the NRB and the remainder is exempt.
2.Wife's death - some IHT payable by estate. The aggregate estate (including PETs made by wife) comes to £995k. Deduct wife's NRB and RNRB of £450k (£325k+£125k). Deduct husband's transferable nil rate band and RNRB of £400k (£275k + £125k).

Balance of £145k subject to IHT at 40% = £58k.

The personal representatives usually have to pay IHT by 6 months after the end of the month of death - ie. June 2019. Some, related to the property, may be payable in instalments over ten years or when the property is sold.

[Jason123456]

Thank you....so the children would have no IHT to pay and all eventual IHT would come from estate,where executors would realise some cash from estate investments to settle with HMRC?.....therefore should be no problems finding the funding for inheritance tax due?


Could I add another scenario:

Assume year 2020 when death occurs of surviving spouse,....Total estate value say £900k (less than £1m), made up of £400k ofinvestments and £500k of Residence value, am I correct in thinking that HMRC would require tax on £500k-£350k...ie £150k(RIHT).
Therefore when one may think at 2020 tax free inheritance of estate is £1m,this does not mean in my scenario inheritance tax is avoided.....where total estate value is £900k!

[AGoodman]

Yes, BUT the executors have to pay the tax before they can get probate and sell assets etc. They would probably only be able access cash within the estate and then only if the bank was part of the scheme allowing IHT to be paid pre-probate (most UK high street banks are).

I don't understand your new scenario. You can still apply regular nil rate bands to property in excess of the residential nil rate band. Estate of £900k plus two £50k failed PETs should be tax free from 6/4/20.

[Jason123456]

Thanks again...interesting particularly the position of some high street banks and pre-probate funds availability
.

On other question....ignoring my initial scenarios

I understand there are now two NRB’s
IHT Investments....NRB Joint £650k
RIHT Residence.....NRB Joint £350k

My query is....I believe these are separate and cannot be combined to a Total NRB of £1m,such that if the estate was made up of say £400k Residence and £600k investments, tax would still be payable on £400-£350...ie on £50k (since Residence NRB is exceeded).

Or am I wrong,.....because combined assets don’t exceed £1mtherefore no tax to pay?..........which is correct?

[AGoodman]

You're wrong. You can add them together.

NRB applies to anything. RNRB applies only to residence passing to descendants. And the single RNRB is still only £100,000, rising to £125,000 in April so with a transfer £200K rising to £250k.

[Jason123456]

So,..if all of RIHT NRB is not used,ihe remainder can be added to IHT NRB,thus increasing effectively the NRB associated with Investments?...or vice versa?...If all of IHT NRB is not used the remainder can be added to the RIHT NRB.. ie..If in 2020 house is valued at £400k and investments were valued at £600k, then no Inheritance tax to pay?